Why the iPad Air could be a major cash cow for Apple

Apple’s margins could get a welcome boost from the iPad Air. AllThingsD reports that research firm IHS has done a bill-of-materials analysis for the iPad Air and has concluded that it’s actually cheaper for Apple to manufacture than the third-generation iPad was when it first came out in 2012. In total, IHS says that it costs Apple around $274 to make the base version of the iPad Air, or about $42 less than it cost to manufacture each third-generation entry-level iPad.

The reason for this, says IHS, is that other than a more expensive display and the A7 processor, the iPad Air doesn’t have too many new components and Apple can now buy those older components at a lower cost than it could in 2012. This means that the iPad Air could potentially be very lucrative for Apple since it’s still selling the device starting at $500 and IHS estimates that its gross margins on the Air will range from 45% on the 16GB Wi-Fi-only model to 61% on the 128GB LTE model.